Answer:
$34,243.28
Explanation:
Simple interest = P x r x t
where:
P = Principal
r = rate
T = time
Therefore simple interest = 20,000 x 6% x 4 = $4,800
Compound Interest = ((P*(1+r)^n) - P),
where P is the principal,
r is the annual interest rate = 7%, and
n is the number of periods = 4 years x 4 quarters a year.
Therefore compound interest = ((20000 (1+0.07)^16)-20000) = $39,043.28
Difference in interest = $39,043.28 - $4,800 = $34,243.28
Answer:
$1,599
Explanation:
Maria has two alternative investment opportunities:
investment A:
interest earned = present value x r x n = $20,000 x 6% x 4 years = $4,800
investment B:
future value = present value x (1 + r)ⁿ
future value = $20,000 x (1 + 1.75%)¹⁶ = $20,000 x 1.0175¹⁶ = $26,398.59 ≈ $26,399
interest earned = future value - present value = $26,399 - $20,000 = $6,399
the difference between the amount of interest earned = $6,399 - $4,800 = $1,599
